1. Field of the Invention
The present invention relates to a statistical system and method for filtering sales history to yield two demand series—one that is time insensitive (i.e. function of price and promotional activities only) and another that is price & promotional activities insensitive (i.e. function of temporal factors only). Once this task is completed, then specialized econometric techniques can be used to model the former and specialized time series techniques can be used to model the latter.
2. Description of Related Art
The fundamental premise of price/promotions optimization is that demand depends on price and other marketing instruments. It is also well-known that demand is affected by other factors such as seasons, life cycles, market trends, etc. In the absence of price experimentation, client sales history simply captures demand over time in the presence or absence of other marketing instruments, i.e., demand is implicitly captured as a function of time, the price charged and other marketing instruments. In such cases, it is desired that sales history be pre-processed to produce two demand series—one that is time insensitive (i.e., function of price and marketing instruments only) and another that is marketing instruments insensitive (i.e., function of time only). Once this task is completed, then specialized econometric and time series techniques can be used to model each of the two demand series independent of one another.